401(k) Catch-Up Limits Are Going Up. Here's What That Means for You
Image source: Getty Images The IRS recently released the updated 401(k) contribution limits for 2025. While the increase for employees under the age of 50 is modest, there's an expanded catch-up contribution limit for those over the age of 60.Alert: highest cash back card we've seen now has 0% intro APR into 2026 This credit card is not just good – it's so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes. Here's the new limit and why it could benefit older Americans who want to add to their investment accounts before they retire.What is the catch-up contribution limit?As you may know, a 401(k) is an employer-sponsored retirement savings plan that lets employees contribute a portion of their salary pre-tax, lowering their taxable income while allowing their investments to grow tax-deferred until withdrawal.A catch-up contribution limit allows individuals over the age of 50 to save more than the standard annual limit of $23,000 in their 401(k)s. This helps them boost their retirement savings as they approach retirement.Ideally, we'd all start contributing to our 401(k)s in our 20s, giving our accounts ample time to grow. But life happens. Maybe you didn't make enough money to add to your 401(k) in your 20s or didn't have access to one. A divorce could mean you've given a previous spouse part of your retirement savings. Health scares, buying a home, or just shoring the financial gap while unemployed can all hit your retirement accounts. The catch-up contribution allows people over 50 to "catch up" on their retirement savings.Opening an IRA in addition to your 401(k) can help you save more for retirement. Check out the best IRA accounts.Catch-up limit for people between the ages of 60 and 63: $11,250Starting in 2025, the IRS has considerably increased the catch-up contribution on 401(k)s for those between the ages of 60 and 63. The change applies to 401(k)s, 403(b)s, governmental 457 plans, and the federal government's Thrift Savings Plan.It created a higher catch-up contribution limit that applies to most employees aged 60, 61, 62, and 63. From next year onwards, this higher catch-up contribution limit is $11,250 instead of the $7,500 allowed to those between the ages of 50 and 60.It's worth noting that the catch-up contribution is in addition to the new 401(k) limit of $23,500. This chart outlines the new annual contribution limits, by age.Age2025 401(k) Contribution LimitLess than 50$23,50050-60$31,00060-63$34,750Data source: IRS.gov and the author's own calculations. Those few extra thousand dollars can add up over time. Let's say you have $100,000 in your 401(K) at age 50 and then increase your contributions to $31,000 per year. By the time you're 60, assuming an 8% average return, you could have around $665,000.Between the ages of 60 and 63, you could then stash away an extra $15,000. For some, those additional savings could bring their retirement date a little closer.Check out these budgeting apps that can help minimize spending so you can save more for retirement.Updated standard 401(k) contribution limits: $23,500The annual savings contribution limit for employees with a 401(k), 403(b), governmental 457 plan, and the federal government's Thrift Savings Plan has also increased to $23,500, up from $23,000. If you have your 401(k) payments automated, it might be worth making changes to take advantage of the additional savings.While $500 a year might not sound like a lot, it can add up. A 20-year-old who saves an extra $500 per year, with an average annual return rate of 8%, will save an additional $130,565 by age 60.Want to grow your retirement savings? Consider opening an IRA, tooAlthough the IRA limits stayed the same in 2025, at $7,500, most employees are eligible for both a 401(k) and an IRA. Depending on your income level, you may also have access to a Roth IRA, which offers tax benefits like tax-free growth and tax-free withdrawals in retirement.Alert: highest cash back card we've seen now has 0% intro APR into 2026 This credit card is not just good – it's so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes. We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. Motley Fool Money does not cover all offers on the market. Editorial content from Motley Fool Money is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
Image source: Getty Images
The IRS recently released the updated 401(k) contribution limits for 2025. While the increase for employees under the age of 50 is modest, there's an expanded catch-up contribution limit for those over the age of 60.
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Here's the new limit and why it could benefit older Americans who want to add to their investment accounts before they retire.
What is the catch-up contribution limit?
As you may know, a 401(k) is an employer-sponsored retirement savings plan that lets employees contribute a portion of their salary pre-tax, lowering their taxable income while allowing their investments to grow tax-deferred until withdrawal.
A catch-up contribution limit allows individuals over the age of 50 to save more than the standard annual limit of $23,000 in their 401(k)s. This helps them boost their retirement savings as they approach retirement.
Ideally, we'd all start contributing to our 401(k)s in our 20s, giving our accounts ample time to grow. But life happens. Maybe you didn't make enough money to add to your 401(k) in your 20s or didn't have access to one. A divorce could mean you've given a previous spouse part of your retirement savings. Health scares, buying a home, or just shoring the financial gap while unemployed can all hit your retirement accounts. The catch-up contribution allows people over 50 to "catch up" on their retirement savings.
Opening an IRA in addition to your 401(k) can help you save more for retirement. Check out the best IRA accounts.
Catch-up limit for people between the ages of 60 and 63: $11,250
Starting in 2025, the IRS has considerably increased the catch-up contribution on 401(k)s for those between the ages of 60 and 63. The change applies to 401(k)s, 403(b)s, governmental 457 plans, and the federal government's Thrift Savings Plan.
It created a higher catch-up contribution limit that applies to most employees aged 60, 61, 62, and 63. From next year onwards, this higher catch-up contribution limit is $11,250 instead of the $7,500 allowed to those between the ages of 50 and 60.
It's worth noting that the catch-up contribution is in addition to the new 401(k) limit of $23,500. This chart outlines the new annual contribution limits, by age.
| Age | 2025 401(k) Contribution Limit |
|---|---|
| Less than 50 | $23,500 |
| 50-60 | $31,000 |
| 60-63 | $34,750 |
Those few extra thousand dollars can add up over time. Let's say you have $100,000 in your 401(K) at age 50 and then increase your contributions to $31,000 per year. By the time you're 60, assuming an 8% average return, you could have around $665,000.
Between the ages of 60 and 63, you could then stash away an extra $15,000. For some, those additional savings could bring their retirement date a little closer.
Check out these budgeting apps that can help minimize spending so you can save more for retirement.
Updated standard 401(k) contribution limits: $23,500
The annual savings contribution limit for employees with a 401(k), 403(b), governmental 457 plan, and the federal government's Thrift Savings Plan has also increased to $23,500, up from $23,000. If you have your 401(k) payments automated, it might be worth making changes to take advantage of the additional savings.
While $500 a year might not sound like a lot, it can add up. A 20-year-old who saves an extra $500 per year, with an average annual return rate of 8%, will save an additional $130,565 by age 60.
Want to grow your retirement savings? Consider opening an IRA, too
Although the IRA limits stayed the same in 2025, at $7,500, most employees are eligible for both a 401(k) and an IRA. Depending on your income level, you may also have access to a Roth IRA, which offers tax benefits like tax-free growth and tax-free withdrawals in retirement.
Alert: highest cash back card we've seen now has 0% intro APR into 2026
This credit card is not just good – it's so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!
Click here to read our full review for free and apply in just 2 minutes.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. Motley Fool Money does not cover all offers on the market. Editorial content from Motley Fool Money is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
